Consider the Seven Statements That Follow

question 39

Essay

Consider the seven statements that follow.
1. An analysis of fixed overhead will typically result in the computation of the fixed-overhead spending variance and the fixed-overhead volume variance.
2. The standard rate for fixed overhead is computed by dividing a company's budgeted fixed overhead for the period by the planned manufacturing activity.
3. A company uses direct labour hours to apply manufacturing overhead to units of production. If the company reports an unfavourable labour efficiency variance, that same firm might report a favourable variable-overhead efficiency variance in the same accounting period.
4. The amount of actual fixed overhead for an accounting period is used to compute the fixed-overhead volume variance.
5. If a company's standard hours allowed for the manufacturing activity attained exceeds the planned manufacturing activity, the firm will report a favourable fixed-overhead volume variance.
6. The amount of fixed overhead that a company has budgeted for an accounting period will increase or decrease with the actual number of units produced.
7. The fixed-overhead volume variance indicates whether the level of production activity attained is higher or lower than the level originally anticipated.
Required:
Determine whether the preceding statements are true or false. If a statement is false, briefly explain why it is false.

---

Definitions:

Budget Constraint

The limitations on the consumption choices of an individual or household given their income and the prices of goods and services.

DVD

A digital versatile disc (DVD) is a type of optical storage media used for video, audio, and data storage.

CD

A compact disc, a small plastic disc used to store data digitally, including music, images, or software.

Budget Constraint

The limits on the consumption bundles that a consumer can afford, based on their income and the prices of goods and services.